Child support paid by high-income earners is recalculated

Unfairness in the existing formula was a driving force for the Legislature’s adoption of the changes

By Christine Gordon

Published: September 6, 2013

Recently enacted changes to the state’s child support formula and guidelines should have a dramatic effect on the amount paid by high-income earners.

The amendment – enacted in the previous legislative session -- took effect July 1. It was the result of a 2009 economic analysis/study prepared by the University of New Hampshire.

Under the previous formula and guidelines, an obligor paid child support based on a percentage of his or her net income. The percentage was based on the number of children of the parties – 25 percent of net income for one child, 33 percent for two children, 40 percent for three, and 45 percent for four or more.

The previous guidelines failed to incorporate in a substantive way the obligee’s income in determining the amount to be paid by the obligor.

For example, prior to July 1, if an obligor earned $11,000 per month in gross income, he or she would pay the same approximate amount ($1,990) whether the obligee earned $1,500 or $4,000 per month. The obligor was required to pay that same approximate amount even if the obligee earned more than the obligor.

The unfairness inherent in the existing formula was a driving force for the Legislature’s adoption of the some of the recommendations of the UNH study.

In an effort to address the inequities of the previous formula and guidelines, child support is now calculated using the income shares model, or ISM, which is based on the premise that a child should receive the same percentage of total parental income as the child would have received had the family remained intact. The new calculation will combine the income of both parties, determine the total amount that will presumably be spent on the child and then determine each parent’s respective proportional amount from the total.

Using the new formula and guidelines, the same obligor referenced above would pay approximately $1,546 per month -- a difference of $444 per month. If the obligee in that same hypothetical scenario earned $4,000 per month, the obligor would pay $1,496 per month, a difference of $494 per month.

Thus the amendment alleviates some of the inequities inherent in basing child support solely upon the obligor’s income without any real consideration of obligee’s income and obligor’s own contribution to child-rearing costs.

Guideline changes

The second significant benefit to high-income earning obligors is the reduction in the percentage of combined net income devoted to child support once it exceeds $60,000.

Under the previous guidelines, child support was also based on the number of children, and economic analyses determined that as income increases, the proportion of income spent on supporting a child decreases.

The UNH study recommended a decrease in the percentage of child support to be paid as the combined net income of the parties increases. The percentage of combined net income devoted to child support for one child incrementally drops from 25 percent to as low as 19 percent when the combined net income devoted to child support increases from $60,000 to $125,000 or more. So the higher the combined net income of the parties, the greater the reduction in the percentage of combined net income attributable to child support.

The same hypothetical obligor mentioned earlier would experience a drop in his or her child support payment from $1,990 to $1,628 solely as a result of the percentage decrease from 25 percent to 20 percent. An obligor earning $25,000 per month, with four children would experience a greater reduction – from approximately $7,700 per month to $5,803 per month, reflecting the decrease from 45 percent to 33 percent. That same obligor would pay $5,736 per month if the obligee earned $4,000 per month. Thus, high-income earners will experience real relief from the inequities in the previous formula and guidelines.

The new guidelines are effective for new cases filed after July 1 as well as for pre-July 1 cases in which the issue of child support has not yet resulted in a final uniform support order.

Although the amendment may create a significant difference between the previous and the revised child support guideline amounts, the new statute will not, in and of itself, constitute a substantial change in circumstances entitling a party to a review before the three-year statutory entitlement period has run.

Christine Gordon, a family law lawyer and equity partner at Manchester-based Wadleigh, Starr & Peters, can be reached at 603-206-7214 or cgordon@wadleighlaw.com.

This article appears in the September 6 2013 issue of New Hampshire Business Review